GAO Comes Down on Federal IT Contracting

The Government Accountability Office (GAO) has released a report calling for better management of Federal IT service contracts at the Department of Defense, Department of Homeland Security, National Aeronautics and Space Administration, and the General Services Administration.

The Oct. 22 GAO report follows a similar directive issued last week by the Office of Management and Budget (OMB) to all Federal agencies and departments. Both the GAO report and the OMB directive say the Federal government could save billions through a more strategic approach to buying IT products and services.

In this latest report?commissioned by a bipartisan group of Senate leaders?GAO researchers compared poor Federal government IT purchasing strategy with that of commercial companies. GAO said private industry is known to save four to 15 percent annually by aggregating their IT service needs to negotiate better prices.

Most of the agencies in the study are using “hundreds of potentially duplicative contracts,” with only 10 to 44 percent of their IT services purchased through preferred strategic sourcing contracts in fiscal year 2013. GAO compared this to private industry, which purchases 90 percent of its IT services strategically.

GAO found a difference of 62 percent between the highest and lowest IT service labor rates being charged the Federal government, which GAO attributed?in part?to differences in geography, security, and skill requirements needed for the services. Two Federal IT contractors, combined, billed 117 discrete labor categories?with multiple variations, the study found. This made it difficult for federal IT managers to compare rates, GAO said.

“One of the biggest barriers to strategic sourcing in general is cultural,” said Katell Thielemann, public sector research director at Gartner Inc. “Buyers perceive that they will lose control if they entrust the acquisition process to someone else.”

The second barrier, according to Thielemann, arises when strategic sourcing moves outside of commoditized environments. “The minute you start needing customization, the idea of aggregating buys and demanding volume discounts becomes more difficult,” Thielemann said. “Finally, the idea of strategic sourcing for services — which relies on normalized labor rates — is diametrically opposed to performance [and] outcomes-based thinking where vendors are paid for the value they provide, not incentivized to a race to the bottom on labor hour pricing,” she said.

GAO praised the agencies for having improved strategic spending for software design and development over recent years.

Administrators of the studied agencies agreed with GAO’s findings and recommendations. NASA officials said NASA will analyze its IT spending by February 2016 and will develop guidance and “overarching goals and metrics for saving” by January 2017.

DOD officials said they plan to analyze IT spending strategies and establish “utilization and savings goals” for its portfolio of IT contractors by the end of 2015.

DHS said it will make the needed improvements by the third quarter of fiscal year 2016.

“As more agencies [and] bureaus realize that they would be better served by focusing on their core missions instead of wasting time hogging pet contracts, we should start seeing a change,” Thielemann said. “FITARA should help in this regard as well.”